Lookout China! Here Comes Walmart. Again; To Brexit? Or Not to Brexit? That is the Question; Volkswagen’s Emission Impossible

Ni-hao, Walmart…

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Because Walmart isn’t big enough, the retailer has now teamed up with China’s number two e-commerce site to take on…China. Alibaba, in case you hand’t heard, holds the illustrious top spot. In any case, Walmart will be selling its commerce marketplace in China to JD.com and in return Walmart will gain about 5% of JD.com’s total shares, which comes out to about 145 million shares, give or take. Those shares are said be valued at about $3 billion, depending on whom you ask. By the way, in terms of revenue growth, JD.com has outpaced Alibaba for almost the last two years. Walmart currently has a marketplace platform in place in China called Yihaodian, but JD.com will be taking it over in hopes of finally achieving some solid retail love in China, which has eluded the mega-tailer, thus far. Walmart’s thinking positive thoughts that this deal will help increase its market-share in one of the biggest economies in the world. Walmart opened its first store in China back in 1996, yet it is a bit bummed because it only has about 430 stores there as expansion in China has been underwhelming.

Hail or not to the Brexit?

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June 23rd’s Brexit vote is just around the corner so it would be prudent to discuss why the U.S. should care about British politics, even if its politicians aren’t nearly as entertaining as ours. So, in case you hadn’t heard, at issue is whether Britain should exit from the EU. Hence, the term “Brexit.” Catchy, huh? Brexit advocates cherish their sovereignty and find that as a member of the EU, they don’t find themselves enjoying their sovereignty quite the way they’d like. While that is awfully patriotic, there are major MAJOR economic drawbacks to a Brexit. British Prime Minister David Cameron is worried that a Brexit will hurt wages and usher in an era of uncertain economic stability. Economists and other assorted experts on the matter are worried that the pound, Britain’s currency, will plunge in value, should Britain make a run for it. A plunge in value of a currency is never a good thing, especially for the country whose currency is sent plunging. Of course, tourists and others buying Bristish goods and services might not mind that so much since everything for sale there would become a relative bargain. It’s also important to consider the potential epic losses for Americans whose economic interests are heavily dependent on exports to the U.K. But there are also plenty of other Americans who might become inclined to ditch their investments and other economic opportunities in Britain as well. An exit from the EU would require all sorts of new trade agreements – for everyone  – and those things just take forever to draw up. Britain’s interests would almost certainly take a back seat to the bigger and more profitable interests of the loftier EU. As of now, there are no tariffs between the 27 members of the EU. A Brexit would change that for Britain and make tariffs a way of life, together with high tea and Harrod’s. So I guess it’s a good sign – just not for Brexit advocates – that polls show a Brexit isn’t likely.  The British sterling rose and one of its indexes, the FTSE  (rhymes with tootsie) also picked up some steam as a result of the anti-Brexit poll numbers.

Smelling a rat…

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Ex-Volkswagen CEO Martin Winterkorn is under investigation, which probably shocks no one. He is under investigation because German prosecutors suspect that Winterkorn violated securities laws since he waited too long to disclose to investors the potential cost of the ugly emissions scandal that continues to plague the auto maker. If you recall, the EPA is more than a bit peeved that Volkswagen manipulated results of emissions tests on its vehicles, with more than 11 million diesel vehicles poisoning the air we breathe. Winterkorn apparently knew about the emissions problems for over a year before he made any comments on it. He should have said something well before September 22, 2015. But he didn’t. And herein lies the problem. Even if he did resign days later. Of course, blame games in major companies have become somewhat of a sport, or in this case, a veritable comedy. Executives at the company are pointing fingers at a handful of mid-level employees – I kid you not – and assume that the public is going to believe them when they say that top management were completely oblivious to emissions manipulations taking place right under their executive-polished noses. Incidentally, there is another executive who is also under investigation but his/her identity has yet to be revealed. What has been revealed is that it is not ex-Volkwagen CFO Hans Dieter Poetsch. Lucky him.  According to the investigation, 17 people are said to be involved. But in the meantime, hundreds of lawsuits continue to mount against Volkswagen, and the car company has plans to pony up a $10 billion settlement in the U.S. come June 28.

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The Very Under-Performing Caterpillar; H&M’s Fashionable Earnings; Nein the Better for Volkswagen

Cocooning…

Image courtesy of Supertrooper/FreeDigitalPhotos.net

Image courtesy of Supertrooper/FreeDigitalPhotos.net

Caterpillar took a brutal hit today on Wall Street, after cutting its sales outlook and whipping out bad news for some 5,000 employees who can expect a pink slip between now and the end of 2016. By 2018, that number is expected to reach 10,000. And there will be no transformation for this Caterpillar any time soon. There’s nothing flitty nor pretty this quarter about the fiscal health of this U.S-based company, whose performance tends to mirror that of the global economy as a whole. When Caterpillar fails to dazzle Wall Street, it’s safe to say something about the economy isn’t dazzling either. Caterpillar has even managed to take the Dow down with it today. The industries the company serves, namely mining, energy and construction, have been hit hard lately, especially in places like China, taking Caterpillar along for the unpleasant ride. This downturn has affected sales and revenue for the monster machines and shares of the company haven’t been this low since April 2010. It stands to be the first time in the company’s 90 year history that sales and revenue will decrease four years in a row. Caterpillar now expects to see $48 billion in sales, $1 billion less than what it was previously hoping to score. With the looming job cuts and big plans to restructure at over twenty plants, Caterpillar thinks it can cut $1.5 billion. Until then, the company hopes the industries it serves will break free from their fiscal cocoons and once again start pollinating the global financial markets.

Trending…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Maybe Caterpillar should consider going into fast-fashion for the time being. Clothing retailer H&M raked in some boffo earnings with sales growing a stylish 20%. The second largest clothing store in the world also has big plans to make its way into China with over 200 stores set to open there, despite the fact that its economy is currently experiencing a very unpleasant slowdown. This move will put H&M’s total store count at 700 in 28 markets. Can you believe the world needs so much fashion? Apparently, the retail sector in China hasn’t been hit as hard as other sectors. Hey, if you’re gonna have an economic downturn, you may as well do it in style. But even though revenue for the company surged to 46 billion kronor ( it’s a Swedish company, after all) from 38.8 billion kronor a year before, profits hardly moved, staying at very flat 5.3 billion kronor. Apparently, some of that is being blamed on the strong U.S. dollar, which seems to be responsible for higher garment costs. That poor U.S. dollar gets blamed for everything, I tell you. The rest of the blame goes to August. As in the month. A hot month, like its cooler counterpart, can negatively affect sales. Who knew?

Das boot…

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

Just as Volkswagen CEO Martin Winterkorn quit his post yesterday, three more top execs at the German car company will be getting axed in the wake of the company’s escalating emissions scandal. The board doesn’t even care if these execs had knowledge about the “defeat devices.” The fact is they were still at the top of the Volkswagen food chain as the scandal started (and continues) to unravel. Germany’s transport minister got in the action and discovered that, lo and behold, the emissions scandal even affects automobiles in Europe. Not to be outdone, everybody’s favorite German Chancellor Angela Merkel also entered the fray urging the company to get it together. In German, of course. VW is also staring at the wrong end of a potentially $18 billion penalty. And that’s just in the U.S. Criminal inquiries and lawsuits also loom large for the company. Ironically, Volkswagen had a scheduled board meeting to extend WInterkorn’s contract, who in his eight years with the German car company, managed to almost triple profits there. I guess he should make other plans and start updating his LinkedIn profile. No official word yet, but Porsche top dog Matthias Mueller might start slumming it in a Volksswagen as he’s apparently in the running for the top post now at the embattled company.